Insomniac Games’ devastating hack has been the highlight of this week’s headlines, with basically the entire company’s plans for the next few years finding its way online. It took days for Insomniac to release a statement, which should clue you in on how big of a deal this is.
From personal employee information to exclusivity deals, release windows, and details of upcoming games, the effects of this hack will be felt for months if not years to come. But, perhaps more importantly, some of the documents paint a bleak picture of the AAA space and how much budgets have ballooned.
Earlier this year, the United Kingdom’s Competition and Markets Authority reported that video game development costs can go very well up to a billion this decade if it already hasn’t. A few months later, Phil Spencer echoed similar thoughts. In between, we found out just how much Sony spent to make Horizon Forbidden West and The Last of Us Part II. Now, we might have just come across the biggest piece of evidence that the AAA games space needs to make changes as soon as possible.
One of the documents revealed that Insomniac spent $300 million to make Marvel’s Spider-Man 2, triple the first game. The worst part? It excludes marketing costs, which must have cost a pretty penny based on the kind of stunts Sony had pulled off all over the world. This astounding figure means that, even if it has since become the fastest-selling exclusive ever, it will likely take a quarter for it to make bank. This isn’t such a long time, all things considered, but it does put into perspective why Sony is asking Insomniac to cut costs, among other things. Finally, it explains the budget for Marvel’s Wolverine and other upcoming X-Men games.
If it’s any consolation, a chunk of the $300 million budget went to employee salaries, bonuses, and benefits. Because it’s located in California, these cost A LOT of money.
So, if you’re wondering why Insomniac can afford to release a AAA title nearly every year, this is why – the employees are getting paid well to do so.
But even if it all went well for Sony, there has to be a point where the budget gets so high that none of the accolades or commercial success matters. And, what if Marvel’s Spider-Man 2 didn’t sell well? Days Gone suffered from such a fate at launch and ended up not getting a sequel. It’s easy to see how Marvel’s Spider-Man 2 could’ve been a miss and ended up putting a massive dent on Sony’s finances.
Of course, this isn’t an isolated problem. Sony isn’t the only studio spending hundreds of millions making massive AAA games. It can afford to get away with it and so can Rockstar Games because, no matter how much Grand Theft Auto 6 ends up costing, it will print billions in its first week – and more every year for as long as it’s supported. We can’t say the same for other companies. Case in point, Microsoft, who wants to go toe-to-toe with Sony in making AAA single-player titles but without the benefit of unit sales. Instead, Xbox is relying on the uber-expensive Game Pass to make bank. It’s claiming that Game Pass is making them money, but how much remains to be seen. Not to mention, Microsoft hasn’t released anything close to what Marvel’s Spider-Man 2 cost Sony.
Microsoft has already made several adjustments following the massive commercial failure of Redfall and the not-so-great reception of Starfield, perhaps in preparation for when those AAA budgets start to double and triple in cost.
The Elder Scrolls VI, Fallout V, and maybe even Marvel’s Blade, are candidates for some of Microsoft’s most expensive upcoming games. Because they’re likely going to be exclusive to a platform that has been laughably outsold so far, it’s not looking so great for either game. They’ll all need to somehow set a new record for Game Pass and Xbox sales to come close to breaking even. The only advantage is that Microsoft has a much higher threshold for risky investments, mostly because it has deeper pockets.
Ultimately, what’s clear here is that something should change and Sony is arguably leading the charge. It initially tried to go the live-service route, but based on the cancelation of The Last of Us’ multiplayer spin-off and the co-op Marvel’s Spider-Man game, it must have realized that this is no longer the most financially feasible route. Instead, it seems to be pivoting towards a combination of reasonably-priced expansions, free DLCs, and standalone spin-offs, with PC ports and a sprinkling of middle-tier /AA games in between. This “throwing everything on the wall to see what sticks” approach by Sony stands in contrast to Microsoft’s “all eggs on one Game Pass basket” tactic.
Both endeavors come with an absurd amount of risk to make profit, which, so far, appears to have worked out for each company, relative to their goals. The only question now is, which will bend if not break first?
We suppose we’ll have to leave it up to our tomorrow’s selves to find out.
